The golden days could be over for New Zealand's dairy industry, which faces flat milk prices and slower production growth over the next 10 years.

This will create challenges for Fonterra, dairy farmers and the wider New Zealand economy, coming off a decade when production soared and the price of whole milk powder more than doubled.

But commentators say the industry is still in good shape despite growth constraints and increased overseas competition.

A recent study, the OECD-FAO Agricultural Outlook 2014-2023 report, looked at global dairy demand and production over the next decade.

It found that supply and demand would rise at roughly the same rate, 1.9 per cent per year, meaning the price boom since 2003 was unlikely to be repeated.

The report predicted that most of the major dairy commodities, including New Zealand's biggest dairy export, whole milk powder, would be flat during the decade and would actually fall slightly in real terms after adjusting for inflation.

"Nevertheless, real prices will be substantially higher than in the period before 2007," it states.

ASB rural economist Nathan Penny said while dairy farmers should not expect a repeat of the big price growth of the past few years, the flat forecast was off a high base of US$4000/tonne of milk solids.

Prices are now just above US$3000 after falling 40 per cent in the past six months.

The current price "is still very profitable for the majority of farmers", Penny said. "If those long-term forecasts play out, dairy in New Zealand will be in pretty good shape."

While prices were likely to be flat over the long term, there would be short-term volatility due to adjustments in supply and demand, he said.

Penny said farmers in the European Union and United States had significantly increased their production recently in response to strong prices, which had contributed to the subsequent dairy-price drops.

In the longer term, he said, much of the global growth would come from China, Brazil and India, which the OECD predicts will overtake Europe as the world's largest dairy-producing market within the next decade.

"India hardly exports at all. It's a pretty closed market and it's pretty hard to export there, hence why it's on the outside in discussions on the global dairy market.

"You would like to think India would open up over time and New Zealand is pursuing a free-trade deal with India."

The OECD report forecast milk production would increase by 2.7 per cent a year in China, 0.9 per cent a year in the US and a "sluggish" 0.5 per cent in Europe out to 2023.